Government shuts down 3 largest poker websites, indicts founders

Dramatically
raising the stakes in its battle against online poker -- and the credit card
transactions that have fueled the explosive growth of Internet gambling -- the
U.S. government has indicted the founders of the three largest poker sites,
seized five Internet domain names and issued restraining orders against more
than 75 bank accounts.

FOLDED: FBI, JUSTICE DEPARTMENT
SHUT ONLINE POKER SITES

The U.S. government seized three large online poker sites Friday; players were greeted not by the chance to play, but a stern government notice. This is a screenshot from the PokerStars.com site Friday. Click for larger image.

The
extraordinary action, taken last week, sought to shut the online operations of
PokerStars, Full Tilt Poker and Absolute Poker, the three largest companies in
the burgeoning field of Internet poker playing, but the government's moves appeared
to be only partially successful.

By Monday, visitors to the original .com
version of those three sites were greeted sternly by the logos of the
Department of Justice and the Federal Bureau of Investigation and the terse
message: "This domain name has been seized...."
But PokerStars and Full Tilt Poker appeared to have resumed operation by
using other domain suffixes.

Experts
were not surprised by the continuing game of cat and mouse.

"Now, the
feds have seized .com domain names and charged operators with bank fraud," said
I. Nelson Rose, a gambling law expert who teaches at Whittier Law School in
Mesa, Calif., and at the University of Macau.
"So, gaming sites are switching to .eu and .uk [along with others], and
cutting off all physical contact with the U.S."

In addition
to bank fraud, among the charges filed in the indictment unsealed in New York
City were: conspiracy, unlawful Internet gambling, money laundering, and wire
fraud. The government said it was seeking at least $3 billion in the forfeiture
of illicit gains and penalties for money laundering.

The
founders of all three firms were among the 11 people charged in the indictment.

Broad conspiracy allegedGovernment
officials accused them of participating in a broad, multilayered conspiracy to
evade U.S. laws against Internet gambling. In particular, they are accused of
violating laws and regulations intended to block the use of credit cards by
players of online poker.

That conspiracy
allegedly included successful efforts to compromise owners and executives of
small banks that were struggling to survive the banking crisis and other
elements of the Great Recession.

As charged, these defendants
concocted an elaborate criminal fraud scheme, alternately tricking some U.S.
banks and effectively bribing others to assure the continued flow of billions
in illegal gambling profits.

--
Preet Bharara
U.S. Attorney for the Southern
District of New York

"As charged, these defendants
concocted an elaborate criminal fraud scheme, alternately tricking some U.S.
banks and effectively bribing others to assure the continued flow of billions
in illegal gambling profits," Preet Bharara, U.S. Attorney for the Southern
District of New York, said after the indictments were unsealed.

"Moreover, as we allege, in their zeal to
circumvent the gambling laws, the defendants also engaged in massive money
laundering and bank fraud," he said. "Foreign firms that choose to operate in
the United States are not free to flout the laws they don't like simply because
they can't bear to be parted from their profits."

There was no immediate comment from
the companies involved in the case. Organizer groups of online poker players,
however, expressed fury.

"Millions of Americans across the
country today are outraged over the U.S. Department of Justice's clear attack
on internet poker," said John Pappas, executive director of the Poker Players
Alliance, an advocacy group with more than 1 million members nationwide. "While
the government's focus may be on the companies that operate these games, this
is plain and simple a declaration of war on poker players and poker players'
freedoms."

He noted that many online poker
players were having trouble accessing their online transaction accounts.

"Not only are the over 10 million
online poker players left without a place to play the game they enjoy, and from
which many earn their livelihood, but they also have concerns over the
availability of their funds," Pappas said. "The PPA believes that no players'
money should be jeopardized by this prosecution."

Anti-gambling law enforced
The charges, based on a lengthy
probe by the Federal Bureau of Investigation and the U.S. Attorney's office,
were filed under the Unlawful Internet Gambling Enforcement Act, a 2006 law
that has been widely criticized by online poker players and their supporters.

The law generally prohibits
the transfer of money from U.S. financial institutions to gambling sites,
requiring credit card networks and banks to navigate a dense jungle of
conflicting definitions and rules. Though efforts were under way to negate or
at least soften that law, the rules attached to it already had pushed virtually
all of the online gambling industry overseas.

In effect, the charges filed Friday
accused the gambling sites and their founders of using their offshore bases as
staging areas for a nearly operatic effort to dodge the laws regarding
financial transactions.

"Because U.S. banks and credit card
issuers were largely unwilling to process their payments, the poker companies
allegedly used fraudulent methods to circumvent federal law and trick these
institutions into processing payments on their behalf," the government said in
a news release.

In some cases, the indictment
charges, several of the defendants manipulated credit card charges and
camouflaged the payments received from U.S. online gamblers -- disguising them
as payments for jewelry, golf balls and other merchandise. To accomplish this,
they hired middlemen as "highly compensated payment processors" who created
phony corporations and websites to handle the credit card payments, according
to the indictment.

Later, as the recession deepened
and small, local banks began to totter, some of the defendants settled on an
even more nefarious scheme, according to the federal government. They allegedly
tempted and successfully corrupted the owners or managers of some of those
endangered banks.

"PokerStars, FullTilt Poker, and their payment
processors persuaded the principals of a few small, local banks facing
financial difficulties to engage in such processing in return for multi-million
dollar investments in the banks," the government alleged.

Among the defendants in the case:
John Campos, vice chairman and part owner of SunFirst Bank, located in Saint
George, Utah. Though initially expressing "trepidations" about the scheme, the
government said, he allegedly accepted a $10 million investment in his bank in
return for agreeing to process credit card transactions related to online poker
playing.

"These defendants, knowing
full well that their business with U.S. customers and U.S. banks was illegal,
tried to stack the deck," said FBI Assistant Director-in-Charge Janice K.
Fedarcyk. "They lied to banks about the true nature of their business.

"Then, some of the defendants found banks
willing to flout the law for a fee," she said. "The defendants bet the house
that they could continue their scheme, and they lost."

More arrests sought
Others charged included Isai
Scheinberg and Paul Tate of PokerStars, Raymond Bitar and Nelson Burtnick of
Full Tilt Poker, and Scott Tom and Brent Beckley of Absolute Poker.

Campos and co-defendant Chad Elie,
an alleged "payment processor," reportedly were arrested Friday in Utah and
Nevada, respectively. The six principals of the poker firms were overseas. Federal
prosecutors said they were working with Interpol and other foreign law
enforcement agencies to secure their arrest.

At the same time, the U.S. District
issued a restraining order involving 76 bank accounts in 14 countries --
accounts that allegedly contained the proceeds of the charged offenses.

...[O]nline poker is not a crime and the honest poker
players across the country will not stand to be restricted from one of
America's greatest pastimes.

-- John Pappas
Poker Players Alliance

On the other side of the poker
table, defenders of the online version of the game said that while credit card
transactions made in association with online poker might be illegal, the actual
activity of playing poker on the Internet is not technically illegal.

"Let me be clear," said Pappas, of
the Poker Players Alliance, "online poker is not a crime and the honest poker
players across the country will not stand to be restricted from one of
America's greatest pastimes."

Rose, the gambling law expert, made
a similar point as he sought to place the government action in wider
perspective.

"The DoJ has been waging a war of
intimidation against Internet gambling for years, successfully scaring players,
operators, payment processors and affiliates into abandoning the American
market," Rose said. "Lacking the two essentials to any prosecution -- a statute
that clearly makes the activity illegal and a defendant physically present in
the U.S. -- the feds have announced showy legal action against easy targets
about every other year."

And, if and when the cases come to
court, Rose said prosecutors will confront another hurdle: identifying a
victim.

"If the allegations are true, the operators
brought this on themselves, by lying and bribing bank officials," he said. "Of
course, the prosecutors have the problem of convincing a jury that there is
bank fraud when the 'victims' are tricked into making millions of dollars."

We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Immigrants may need good credit to stay in the U.S. – Under a new proposal, the government would review the credit histories and credit scores of immigrants seeking visas or other status changes. But achieving a high U.S. credit score is an obstacle for many immigrants ...

See the online credit card applications for details about the terms and conditions of an offer. Reasonable efforts are made
to maintain accurate information. However, all credit card information is presented without warranty. When you click on
the "Apply Now" button, you can review the credit card terms and conditions on the issuer's web site.

Related Sites

ADVERTISER DISCLOSURE CreditCards.com is an independent, advertising-supported comparison service. The offers that appear
on this site are from companies from which CreditCards.com receives compensation. This compensation may impact how
and where products appear on this site, including, for example, the order in which they appear within listing categories.
Other factors, such as our proprietary website's rules and the likelihood of applicants' credit approval also impact
how and where products appear on the site. CreditCards.com does not include the entire universe of available financial
or credit offers.

Advertiser Disclosure

CreditCards.com is an independent, advertising-supported comparison service. The offers that appear on this site are from companies from which CreditCards.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within listing categories. Other factors, such as our own proprietary website rules and the likelihood of applicants' credit approval also impact how and where products appear on this site. CreditCards.com does not include the entire universe of available financial or credit offers.